Debt repayment, shrinking of the population and disappearance of the middle class are factors that each one alone and in combination may define the future in Greece. So far, all three of them stand as invincible obstacles resembling Sphinxes posing vital questions that Greek society and politicians can’t answer effectively to move on and avoid further economic and social destruction. But after all , this frustration is based on true facts.
How can such a massive debt of nearly 200% of GDP be repaid without the burden of new loans and with reassurance that growth can be achieved without further impoverishment of the majority?
How in such a constricting framework could it be possible on the one hand to motivate and protect households so as to reinforce births and stop immigration flows of young talented people and on the other hand to benefit from the refugee crisis?
How can destruction of the middle class be prevented so as a growth model not favoring inequality be generated instead of an oligarchic governance?
Greece stands in front of unanswered political riddles that echo like screams through the ruins that stacked the last six years in the country. But the hard future in Greece is not limited to the 3-year period of the recent third adjustment progrαmme and especially when the fear and uncertainty still present, could easily lead to a fourth program to cope with abeyances and delays and so forth. Neither is it limited to a new bank recapitalization that could be repeated to cover new urgent needs that recession itself as well inadequate policies continue to create.
However, the future of a country is surely in danger if people are forced to lose the wealth of a life-time and at the same time economic circumstances undermine the efforts of more than one generation to produce new wealth. If citizens can’t be free and creative individuals any more but rather vassal and nerveless units producing wealth not for their household and social needs but only to service a debt exceeding their capabilities and in fact perpetuating the inequality. If the population is shrinking on the one hand because of a dismal birth rate and on the other hand because of forced migration of young people and the marginalization of senior citizens steadily growing.
So, let us delineate the above mentioned three factors
Shortly after entering the 21st century, Greece joined the euro zone. During these fifteen years approximately, the basic elements of its economic identity have not changed. For example Greece has the highest rate of self-employment in Europe as well as of small businesses with less than 10 people. But especially in today’s conditions, the most important aspect is the situation and the features of the Greek middle class. This is because it is the main source providing revenues to the state and its wealth supports enterprising activities and consumption as well as creating jobs.
According to the Credit Suisse Global Wealth Report 2015, the Greek middle class is currently estimated around 4.3 million adults Greeks owning wealth from about 32,000 to 320,000 euros.
It is really interesting to note the share of Greek middle class wealth in respect to the total wealth of the country. While the European trend was decreasing (from 47.2% in 2000 to 40.6% in 2015), Greece still has one of the highest rates in Europe with 53.6%, which ranks in 4th place after Slovenia, Hungary and Slovakia. Graph -1 shows this economic peculiarity compared with other countries of Northern and Southern Europe.
It is also interesting to observe the course of the Greek middle class from 2000 to 2015. Overall the middle class shrank from 55% in the adult population in 2000 to 47% in 2015. Within this 15-year time period its wealth seems to have increased. However in the report of Credit Suisse the wealth of middle class is calculated together with the wealth of the above middle class.
Therefore, out of the additional wealth of around 200 billion euros since 2000 (Table) only 115 billion relate to the middle class. As a result an average gain for Greek middle class per adult is around 26,000 euros, as compared to the average profit above middle class which accounts for around 340,000 euros per adult.
The number and wealth of the middle class and above in Greece as compared to Europe is shown in the following graph-2. We observe that increase is proportional following the overall trend noted in Europe over the period 2000-2007. On the contrary after the crisis of 2008 losses in Greece were comparatively much higher than the European average.
It could be said that the slight increase in average wealth noted in the otherwise shrinking middle class was practically negligible in comparison to the great economic stagnation after 2008. Also, the shrinkage of middle class should be correlated to the rising of rates of impoverishment and social exclusion seen during the last six years of recession in the country. This course is clearly shown in graph-3 in a manner that actually separates the countries of the North from those of the periphery, in two completely different areas up and down the European (EZ-17) average.
It could be also said that the significant economic benefits of the period 2000-2015 are capitalised over the boundaries of the middle class. 85 billion euros were directed to 2.8% of the adult population (about 250,000) above middle class and much of this wealth – if not most – was related to tax-evasion and tax-avoidance.
Amid crisis the middle class was continuously forced to cover a deficit of order and justice and suffer losses in financial and non financial assets, to such an extent that very soon they will experience an irreversible economic contraction.
But, as we shall see below, this is not due only to the misguided policies of previous right-wing and current left-wing governance in Greece but also to the dynamics that have prevailed because of debt details and demographics, individually and in combination with each other.
Debt and demographics
The life of Greek citizens will be determined by the dynamics of debt repayment by 2057 (Graph-4).
The sums generated in the following decades are shown in Graph-5. Each decade sums up until the last one from 2036 to 2045.
By then, according to life expectancy, most of the people in their fifties today will still be alive. So, the current majority will have to deal with the impacts of debt repayment. Some will grow up with it and others will mature and will age with it. And of course many will be born along with it. But the latter will be fewer. This forthcoming reality could be summarized in the prediction that the next few years, fewer and fewer Greeks will have to pay for a continuously growing debt.
Greece is already threatened by many lurking pitfalls. The workforce although situated in the post war lowest levels , continues to tumble because of the inevitable migration. In 2014 for the fourth year in a row deaths exceed births. And as outlined above, the middle class is being sacrificed on the altar of debt without a convincing and effective plan for recovery and growth.
And when the paths of debt meet with the demographic curves then reality becomes even more uncertain and complex. The following graphs with probabilistic projections depict the range within which the demographics will fluctuate in the coming years. The period 2016-2057 which is the crucial period of repayment of the debt is emphasized in the following graphs of United Nations Population Division.
As observed in graph-6 the current dismal total fertility rate is projected to be under the replacement level of 2.1 children / woman over the next three decades, until the end of the century.
As a consequence the reduction of Greek population in total as well as for those up to 19 years is expected (graphs 7 and 8).
Also, a sharp decline of population between 20 and 64 years old is presented in graph-9.
Finally, a significant increase of population over 65 years old is expected in the near future, which will be reversed after 2050 (graph-10).
The impact of these predictions would be catalytic on the issues of debt repayment, employment status and the social security system but first of all on the existence and continuity of the country itself. Images coming from the near future should already have mobilized the best of political and national reflexes.
Instead spasmodic measures taken only recycle the impasse partly because politicians do not dare to fight clientelism and corruption as well as because creditors are not interested in suggesting consensual policies of a different ethos that should take into account the interests of all and not just of certain social groups or centres of power, inside or outside the country and of course the interests of all future generations.
Today, however, there does not seem to be a Greek leader who is able to answer as Oedipus in existential riddles that dissolve the country. Greece is in the situation of the Prometheus Bound. Stagnation and misery are eating its vitality like the eagle ate Prometheus’ liver in the Caucasus. And no “Deus ex machina” is going to appear to free the Greek middle class from its inertia and shackles if not itself. Greece is looking for the creative reaction of the middle class against the overtaxation and the seizure of its remaining wealth as a last chance to exit the impasse.
Credit Suisse. The Global Wealth Report 2015
ELSTAT. Hellenic Statistical Authority
United Nations Population Division. World Population Prospects, the 2015 Revision
Zero Hedge. For Greece, This Is What Hell Looks Like
Photo: Detail of the painting “Prometheus Bound” by Peter Paul Rubens
Dimitris Trikeriotis, Twitter: @BlogGnathion